Grynberg Production Corp. v. British Gas, PLC, No. 1: 92 CV 496.

CourtUnited States District Courts. 5th Circuit. United States District Court of Eastern District Texas
Writing for the CourtD. Allan Jones, Orgain Bell & Tucker, Beaumont, TX, for defendant Atlantic Richfield Co., Inc
Citation817 F. Supp. 1338
Decision Date19 March 1993
Docket NumberNo. 1: 92 CV 496.
PartiesGRYNBERG PRODUCTION CORPORATION v. BRITISH GAS, P.L.C., British Petroleum Exploration Operating Company, Ltd., Jack L. Gregory, Atlantic Richfield Company, Inc., and TransWorld Resources Corporation.

817 F. Supp. 1338

GRYNBERG PRODUCTION CORPORATION
v.
BRITISH GAS, P.L.C., British Petroleum Exploration Operating Company, Ltd., Jack L. Gregory, Atlantic Richfield Company, Inc., and TransWorld Resources Corporation.

No. 1: 92 CV 496.

United States District Court, E.D. Texas, Beaumont Division.

March 19, 1993.


817 F. Supp. 1339
COPYRIGHT MATERIAL OMITTED
817 F. Supp. 1340
COPYRIGHT MATERIAL OMITTED
817 F. Supp. 1341
Stephen D. Susman, Susman Godfrey, F. Eric Fryar, Neal S. Manne, Houston, TX, for plaintiff

William Robert Pakalka, Layne Edwin Kruse, Rufus Wallingford, Fulbright & Jaworski, Houston, TX, Gilbert Irvine Low, Orgain Bell & Tucker, Beaumont, TX, for defendants British Gas, p.l.c. and Jack L. Gregory.

D. Allan Jones, Orgain Bell & Tucker, Beaumont, TX, for defendant Atlantic Richfield Co., Inc.

James William Mehaffy, Jr., Beaumont, TX, for defendant TransWorld Resources Corp.

MEMORANDUM OPINION AND ORDER DENYING GRYNBERG PRODUCTION CORPORATION'S MOTION TO REMAND

SCHELL, District Judge.

CAME ON TO BE CONSIDERED plaintiff Grynberg Production Corporation's ("Grynberg") Motion to Remand, and the court, after reviewing the Motion, the responses in opposition and the pleadings of record, is of the opinion that this Motion should be DENIED.

The case underlying this removal battle is an involved and complicated dispute between Western corporations over rights to develop mineral resources located in the Republic of Kazakhstan. The weapons in this removal fight are the mountains of briefs and affidavits. The ammunition includes fraudulent joinder, procedural hurdles for removal, Texas choice of law principles, Texas tort law, Kazakhi tort law (and translations thereof), federal question jurisdiction over state law claims presenting a federal issue, federal common law governing international relations, the "act of state doctrine," and the

817 F. Supp. 1342
Erie doctrine. When the smoke clears and the dust settles, the court finds that the valid presence of a Texas defendant bars diversity removal, but the presence of several issues of the federal common law of international relations in the well-pleaded complaint allows federal question removal

OUTLINE OF CONTENTS

I. BACKGROUND

A. The Parties

B. Factual Allegations in Grynberg's Original Petition

C. Grynberg's Causes of Action

II. PROPRIETY OF REMOVAL ON DIVERSITY OF CITIZENSHIP GROUNDS

A. British Gas and Gregory Must Establish Fraudulent Joinder of Both Gregory and TransWorld to Remove on Diversity Grounds

1. Citizenship of Gregory and Trans-World bars diversity removal
2. British Gas and Gregory allege fraudulent joinder of Gregory and Trans-World

B. Gregory Was Not Fraudulently Joined because Grynberg Has at least Some Possibility of Recovery against Gregory on at least One Claim

1. Grynberg's Original Petition simply fails to allege the breach of tort duty claims against Gregory
2. Grynberg's Original Petition fails to allege a conversion claim against Gregory
3. Grynberg's Original Petition does allege fraud against Gregory

a. The alleged failure to satisfy Fed.R.Civ.P. 9(b) will not prevent consideration of the fraud claim

b. Grynberg's Original Petition satisfies Fed.R.Civ.P. 9(b)

4. Texas law permits recovery against Gregory individually for fraud

a. In Texas, agents are individually liable for the torts they commit

b. Grynberg's claim is not merely an estoppel claim

5. Even if Kazakhi law absolutely precludes recovery against Gregory, the chance that Texas law could apply makes joinder nonfraudulent

a. Under Texas choice of law principles, Kazakhstan law is likely to govern this transaction

b. The possibility that Texas law applies to the issue of employee tortfeasor liability makes joinder nonfraudulent

i. Which law governs is an ambiguous question of law

ii. The significance of the Texas contacts to the issue of employee tortfeasor liability could realistically outweigh the significance of the Kazakhstan contacts

6. Even if Kazakhi law necessarily applies, British Gas and Gregory have failed to establish that there is no possibility of recovery

III. REMOVAL ON THE BASIS OF FEDERAL QUESTION

A. Federal Jurisdiction Exists if Grynberg's Well-Pleaded State Law Claims Contain a Substantial Federal Issue

1. Federal question jurisdiction extends to state law claims with a substantial federal issue
2. Federal issues in a state law cause of action must be essential elements of the "well-pleaded complaint"
3. The Original Petition's assertion that no federal issues are presented is not controlling
817 F. Supp. 1343

B. The Notice of Removal was Adequate

1. The notice of removal adequately stated grounds for removal
2. British Gas and Gregory have not asserted "new grounds" for removal

C. Federal Question Jurisdiction Exists if a Question of International Relations Appears in Well-Pleaded State Law Claims

1. State law claims raising issues of international relations implicate federal common law for federal question jurisdiction purposes
2. Questions of international relations are almost always "substantial" in Smith-type cases

D. Essential Elements of Some of Grynberg's State Law Claims, if Well-Pleaded, Turn on the Resolution of Federal Common Law Governing Foreign Relations

1. The well-pleaded complaint rule forecloses federal jurisdiction over the breach of contract claim and the breach of tort duty claims
2. Grynberg's well-pleaded claims for specific performance and other injunctive relief present issues of federal common law governing international relations

a. Grynberg seeks equitable relief to obtain the rights in the Karachaganak Field

b. The basic remedy of specific performance requires allegations that depend upon the application of federal common law governing international relations

c. A well-pleaded claim for injunction under Texas law requires allegations that depend upon the application of federal common law governing international relations

i. To state a claim for injunction in Texas, a well-pleaded petition must negative all reasonably inferable hypotheses which could prevent relief

ii. Unequivocally, Texas state law alone determines what is and what is not necessary to state a claim for purposes of the "well-pleaded complaint" rule

iii. To negative all reasonable inferences and hypotheses which might be fatal to injunctive relief, Grynberg's Original Petition must raise three substantial issues of international law

d. The well-pleaded complaint rule means that the failure of Grynberg's Original Petition to raise these international relations issues does not defeat federal jurisdiction

e. Federal question jurisdiction exists over an alternatively pleaded federal claim

3. Grynberg's well-pleaded conversion claim must allege issues of federal law governing international relations

a. Conversion requires "unlawful and unauthorized" dominion over personal property in which Grynberg had an interest

b. To establish an "unlawful and unauthorized" dominion, Grynberg must allege issues of federal international relations law

c. Grynberg must allege questions of international law to allege that it has an interest in the converted property

E. Supplemental Jurisdiction Exists over All Other Claims and Parties in this Case

IV. CONCLUSION

I. BACKGROUND

A. The Parties

Grynberg Production Company, plaintiff, is a corporation incorporated in Colorado and with a principal place of business in Colorado. Jack Grynberg and Celeste Grynberg are its board of directors. Jack Grynberg is its principal shareholder.

817 F. Supp. 1344

TransWorld Resources Corporation ("TransWorld"), defendant, is a Colorado corporation with its principal place of business in Colorado. Coincidentally, Jack Grynberg and Celeste Grynberg are its board of directors. Jack Grynberg is its principal shareholder. It shares a business office with Grynberg Production Company.

British Gas, defendant, is a British corporation with its principal place of business in Britain.

Jack L. Gregory, defendant, is a citizen of Texas. He is an employee of British Gas.

British Petroleum Exploration Operating Company ("BP"), defendant, is a British corporation with its principal place of business in Britain.

Atlantic Richfield Company ("ARCO"), defendant, is a Delaware corporation with its principal place of business in California.

B. Factual Allegations in Grynberg's Original Petition

This case involves a dispute between oil and gas exploration firms over rights to develop promising oil and gas fields in the Republic of Kazakhstan. Grynberg's Original Petition alleges the following facts. Grynberg is a small oil and gas exploration and production firm located in Colorado. During the 1980s, Grynberg recognized that the long term control over mineral resources in the Soviet Union would eventually devolve from the central Soviet government in Moscow and toward the individual republics. Grynberg began to develop business and political contacts within the republics in anticipation that the republics would ultimately hold the keys to the rich, proven, but as yet untapped hydrocarbon reserves. In particular, Grynberg developed contacts within the Soviet Republic of Kazakhstan.

At the end of 1989 and beginning of 1990, Grynberg focused its efforts on obtaining concessions in the Pricaspian Basin in northwestern Kazakhstan, and persuading other oil and gas exploration firms to form a consortium to jointly develop the hydrocarbon potential of the Pricaspian Basin. According to Grynberg, in April of 1990, the president of Kazakhstan privately told Jack Grynberg, the company's president, that he was assured of a major hydrocarbon award. Consequently, Grynberg intensified its efforts to form a consortium. Grynberg's intent was to have each participating company sign separate agreements with Grynberg that would define the Kazakhi portion of the Pricaspian Basin as an Area of Mutual Interest ("AMI"), give each company a right to participate in any opportunity in...

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31 practice notes
  • Drawhorn v. Qwest Communications Intern., Inc., No. CIV. A. 1:99-CV-415.
    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • May 30, 2000
    ...federal question jurisdiction because the Administrative Procedure Act was involved); Grynberg Prod. Corp. v. British Gas, p.l.c., 817 F.Supp. 1338 (E.D.Tex.1993) (holding that under the well-pleaded complaint rule, a party's request for specific performance, injunction and conversion claim......
  • Popular Democratic Party v. Com. of Puerto Rico, No. Civ. No. 98-2004 PG.
    • United States
    • United States District Courts. 1st Circuit. District of Puerto Rico
    • October 13, 1998
    ...properly informed that the basis for removal was federal question jurisdiction. See Grynberg Production Corp. v. British Gas, p.l.c., 817 F.Supp. 1338, 1354 (E.D.Texas 1993) (28 U.S.C. § 1441's requirements are satisfied by stating on the notice for removal that "one or more Page 197 in [th......
  • Hyatt Corp. v. Stanton, 96 Civ. 4934 (MBM).
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • November 19, 1996
    ...petitions," removal is improper. Delgado, 890 F.Supp. at 1349. Plaintiff relies upon Grynberg Production Corp. v. British Gas, p.l.c., 817 F.Supp. 1338 (E.D.Tex.1993), where removal was granted because plaintiff sought an order from a Texas court granting specific performance of its alleged......
  • Kremen v. Cohen, No. 01-15899.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • January 3, 2003
    ...the document is not itself converted. Restatement (Second) of Torts § 242. 5. See, e.g., Grynberg Prod. Corp. v. British Gas, p.l.c., 817 F.Supp. 1338, 1348 (E.D.Tex.1993) (intangible contract rights); Quincy Cablesystems, Inc. v. Sully's Bar, Inc., 650 F.Supp. 838, 848 (D.Mass.1986) (satel......
  • Request a trial to view additional results
30 cases
  • Drawhorn v. Qwest Communications Intern., Inc., No. CIV. A. 1:99-CV-415.
    • United States
    • United States District Courts. 5th Circuit. United States District Court of Eastern District Texas
    • May 30, 2000
    ...federal question jurisdiction because the Administrative Procedure Act was involved); Grynberg Prod. Corp. v. British Gas, p.l.c., 817 F.Supp. 1338 (E.D.Tex.1993) (holding that under the well-pleaded complaint rule, a party's request for specific performance, injunction and conversion claim......
  • Popular Democratic Party v. Com. of Puerto Rico, No. Civ. No. 98-2004 PG.
    • United States
    • United States District Courts. 1st Circuit. District of Puerto Rico
    • October 13, 1998
    ...properly informed that the basis for removal was federal question jurisdiction. See Grynberg Production Corp. v. British Gas, p.l.c., 817 F.Supp. 1338, 1354 (E.D.Texas 1993) (28 U.S.C. § 1441's requirements are satisfied by stating on the notice for removal that "one or more Page 197 in [th......
  • Hyatt Corp. v. Stanton, 96 Civ. 4934 (MBM).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • November 19, 1996
    ...petitions," removal is improper. Delgado, 890 F.Supp. at 1349. Plaintiff relies upon Grynberg Production Corp. v. British Gas, p.l.c., 817 F.Supp. 1338 (E.D.Tex.1993), where removal was granted because plaintiff sought an order from a Texas court granting specific performance of its alleged......
  • Kremen v. Cohen, No. 01-15899.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • January 3, 2003
    ...the document is not itself converted. Restatement (Second) of Torts § 242. 5. See, e.g., Grynberg Prod. Corp. v. British Gas, p.l.c., 817 F.Supp. 1338, 1348 (E.D.Tex.1993) (intangible contract rights); Quincy Cablesystems, Inc. v. Sully's Bar, Inc., 650 F.Supp. 838, 848 (D.Mass.1986) (satel......
  • Request a trial to view additional results

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